Category: Tax Planning

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Tax-Saving Tips

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New IRS 199A Regulations Benefit Out-of-Favor Service Businesses

If you operate an out-of-favor business (known in the law as a “specified service trade or business”) and your taxable income is more than $207,500 (single) or $415,000 (married, filing jointly), your Section 199A deduction is easy to compute. It’s zero.

This out-of-favor specified service trade or business group includes any trade or business

  • involving the performance of services in the fields of health, law, consulting, athletics, financial services, and brokerage services; or
  • where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners; or
  • that involves the performance of services that consist of investing and investment management trading or dealing in securities, partnership interests, or commodities. For this purpose, a security and a commodity have the meanings provided in the rules for the mark-to-market accounting method for dealers in securities [Internal Revenue Code Sections 475(c)(2) and 475(e)(2), respectively].

If you were not in one of the named groups above, you likely worried about being in a reputation or skill out-of-favor specified service business. If you were worried, you joined a large group of worried businesses, because many businesses depend on reputation and/or skill for success.

For example, the National Association of Realtors believed real estate agents fell into this out-of-favor category.

But don’t worry, be happy. The IRS has come to the rescue by regulating the draconian reputation and/or skill provision down to almost nothing. The reputation and/or skill out-of-favor specified service business includes you if you

  • receive fees, compensation, or other income for endorsing products or services;
  • license or receive fees, compensation, or other income for the use of your image, likeness, name, signature, voice, trademark, or any other symbols associated with your identity; or
  • receive fees, compensation, or other income for appearing at an event or on radio, television, or another media format.

Example. Harry is a well-known chef and the sole owner of multiple restaurants, each of which is a single-member LLC—disregarded tax entities that are taxed as proprietorships. Due to Harry’s skill and reputation as a chef, he receives an endorsement fee of $500,000 for the use of his name on a line of cooking utensils and cookware.

Results. Harry’s restaurant business is not an out-of-favor business, but his endorsement fee is an out-of-favor specified service business.

If you have questions about how the law will treat your business income for the new Section 199A 20 percent tax deduction, please give us a call, and we’ll examine your situation.

Does Your Rental Qualify for a 199A Deduction?

The IRS, in its new proposed Section 199A regulations, defines when a rental property qualifies for the 20 percent tax deduction under new tax code Section 199A.

One part of the good news on this clarification is that it does not require that we learn any new regulations or rules. Existing rules govern. The existing rules require that you know when your rental is a tax law–defined rental business and when it is not. For the new 20 percent tax deduction under Section 199A, you want rentals that the tax law deems businesses.

You may find the idea of a rental property as a business strange because you report the rental on Schedule E of your Form 1040. But you will be happy to know that Schedule E rentals are often businesses for purposes of not only the Section 199A tax deduction but also additional tax code sections, giving you even juicier tax benefits.

Under the proposed regulations, you have two ways for the IRS to treat your rental activity as a business for the Section 199A deduction:

  1. The rental property qualifies as a trade or business under tax code Section 162.
  2. You rent the property to a “commonly controlled” trade or business.

Your rental qualifying as a Section 162 trade or business gets you other important tax benefits:

  • Tax-favored Section 1231 treatment
  • Business use of an office in your home (and, if it’s treated as a principal office, related business deductions for traveling to and from your rental properties)
  • Business (versus investment) treatment of meetings, seminars, and conventions

If your rental activity doesn’t qualify as a Section 162 trade or business, it will qualify for the 20 percent Section 199A tax deduction if you rent it to a commonly controlled trade or business.

How to Find Your Section 199A Deduction with Multiple Businesses

If at all possible, you want to qualify for the 20 percent tax deduction offered by new tax code Section 199A to proprietorships, partnerships, and S corporations (pass-through entities).

Basic Rules—Below the Threshold

If your taxable income is equal to or below the threshold of $315,000 (married, filing jointly) or $157,500 (single), follow the three steps below to determine your Section 199A tax deduction with multiple businesses or activities.

Step 1. Determine your qualified business income 20 percent deduction amount for each trade or business separately.

Step 2. Add together the amounts from Step 1, and also add 20 percent of

  • real estate investment trust (REIT) dividends and
  • qualified publicly traded partnership income.

This is your “combined qualified business income amount.”

Step 3. Your Section 199A deduction is the lesser of

  • your combined qualified business income amount or
  • 20 percent of your taxable income (after subtracting net capital gains).

Above the Threshold—Aggregation Not Elected

If you do not elect aggregation and you have taxable income above $207,500 (or $415,000 on a joint return), you apply the following additions to the above rules:

  • If you have an out-of-favor specified service business, its qualified business income amount is $0 because you are above the taxable income threshold.
  • For your in-favor businesses, you apply the wage and qualified property limitation on a business-by-business basis to determine your qualified business income amount.

The wage and property limitations work like this: for each business, you find the lesser of

  1. 20 percent of the qualified business income for that business, or
  2. the greater of (a) 50 percent of the W-2 wages with respect to that business or (b) the sum of 25 percent of W-2 wages with respect to that business plus 2.5 percent of the unadjusted basis immediately after acquisition of qualified property with respect to that business.

If You Are in the Phase-In/Phase-Out Zone

If you have taxable income between $157,500 and $207,500 (or $315,000 and $415,000 joint), then apply the phase-in protocol.

If You Have Losses

If one of your businesses has negative qualified business income (a loss) in a tax year, then you allocate that negative qualified business income pro rata to the other businesses with positive qualified business income. You allocate the loss only. You do not allocate wages and property amounts from the business with the loss to the other trades or businesses.

If your overall qualified business income for the tax year is negative, your Section 199A deduction is zero for the year. In this situation, you carry forward the negative amount to the next tax year.

Aggregation of Businesses—Qualification

The Section 199A regulations allow you to aggregate businesses so that you have only one Section 199A calculation using the combined qualified business income, wage, and qualified property amounts.

To aggregate businesses for Section 199A purposes, you must show that

  • you or a group of people, directly or indirectly, owns 50 percent or more of each business for a majority of the taxable year;
  • you report all items attributable to each business on returns with the same taxable year, not considering short taxable years;
  • none of the businesses to be aggregated is an out-of-favor, specified service business; and
  • your businesses satisfy at least two of the following three factors based on the facts and circumstances:
  1. The businesses provide products and services that are the same or are customarily offered together.
  2. The businesses share facilities or share significant centralized business elements, such as personnel, accounting, legal, manufacturing, purchasing, human resources, or information technology resources.
  3. The businesses operate in coordination with or in reliance upon one or more of the businesses in the aggregated group (for example, supply chain interdependencies).

Help Employees Cover Medical Expenses with a QSEHRA

If you are a small employer (fewer than 50 employees), you should consider the qualified small-employer health reimbursement account (QSEHRA) as a good way to help your employees with their medical expenses.

If the QSEHRA is indeed going to be your plan of choice, then you have three good reasons to get that QSEHRA plan in place on or before October 2, 2018. First, this avoids penalties. Second, your employees will have the time they need to select health insurance. Third, you will have your plan in place on January 1, 2019, when you need it.

One very attractive aspect of the QSEHRA is that it can reimburse individually purchased insurance without your suffering the $100-a-day per-employee penalty. The second and perhaps most attractive aspect of the QSEHRA is that you know your costs per employee. The costs are fixed—by you.

Eligible employer. To be an eligible employer, you must have fewer than 50 eligible employees and not offer group health or a flexible spending arrangement to any employee. For the QSEHRA, group health includes excepted benefit plans such as vision and dental, so don’t offer them either.

Eligible employees. All employees are eligible employees, but the QSEHRA may exclude

  • employees who have not completed 90 days of service with you,
  • employees who have not attained age 25 before the beginning of the plan year,
  • part-time or seasonal employees,
  • employees covered by a collective bargaining agreement if health benefits were the subject of good-faith bargaining, and
  • employees who are non-resident aliens with no earned income from sources within the United States.

Dollar limits. Tax law indexes the dollar limits for inflation. The 2018 limits are $5,050 for self-only coverage and $10,250 for family coverage. For part-year coverage, you prorate the limit to reflect the number of months the QSEHRA covers the individual 

Top 10 Year End Tax Planning Mistakes

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#10 – Failure to rebalance your stock portfolio’s asset allocation and harvest capital losses to minimize 2017 recognized capital gains. Beginning in 2018, under the new tax law proposals, taxpayers will no longer be able to choose stocks with a higher tax basis to sell.

Taxpayers will be required to use the FIFO method, first-in first-out method for identifying the cost basis for stocks being sold. This method usually results in lower cost basis for stock being sold and thus higher taxes! December, 2017 is the last month in which taxpayers have a choice in determining which stocks to sell at a higher tax basis.

#9 – Failure to purchase furniture, equipment, tools, computers and other fixed assets by December 31, 2017. If business owners plan to purchase those assets during the first six months of 2018, they should consider purchasing those assets in December, 2017. In doing so, business owners may save more taxes on those purchases because tax rates for business owners are expected to be lower in 2018.

#8 – Failure to set up your solo 401k plan or other retirement plan by December 31, 2017! Some retirement plans can be set up by the due date of your tax return but other retirement plans are required to be set up by the end of the year. Keep in mind that your company can set up a retirement plan in December and have until the due date of the tax return in 2018 in which to fund the contributions to the plan.

Contact your CPA to advise you on what type of retirement plan would be most advantageous for you as a business owner in order to maximize the contributions to be made by the business for the owner and to minimize the contributions to the plan for your employees. Plan design is very important!

#7 – Failure how to fully pay your 2017 state and local taxes by December 31, 2017. Under the new tax law proposals, state and local income taxes will no longer be deductible in 2018. Therefore,  you should be estimating how much your 2017 state and city tax liabilities will be and make sure that you make estimated payments by the end of the year to pay those tax liabilities in full.

However, if you are subject to Alternative Minimum Tax (AMT) , then you would not need to pay your state and local taxes in December since you will not get any tax benefit in doing so for 2017.

On the other hand, if you are in Alternative Minimum Tax, you may want to accelerate income into 2017 since that additional income may not increase your taxable income. Your CPA should be contacted to make your projected 2017 tax computations for AMT and regular tax purposes.

#6 – Failure to meet with your CPA and estimate your 2017 taxable income and determine whether you expect 2018 to be better or worse. It is imperative that you review year-end tax saving strategies in December, 2017 with your CPA to take advantage of the Trump tax law proposals that we expect to be effective January 1, 2018.

After you meet with your CPA, if you need a second opinion or do not fully understand the tax planning strategies being recommended to you, call Bill Hesch, attorney, CPA and financial advisor to get a second opinion at 513-509-7829. Peace of mind is only a phone call away.

#5 – Failure to review your choice of entity with your CPA! The question is whether under the new tax law to be effective in 2018, should you continue to be a sole proprietor, partnership, S corporation or C corporation for your business? Keep in mind that the decision to terminate or make an S election for 2018 must be filed with the IRS by March 15, 2018. However you should be reviewing the new tax law with your CPA as soon as it becomes final. We are expecting Congress to pass the new tax legislation by Christmas, 2017.

#4 – Failure to review your divorce decree and identify whether it would be advisable for you to pre-pay 2018 alimony payments in December, 2017. Under the new tax law proposals, alimony payments may not be deductible beginning in 2018. You may also need to contact your divorce attorney to review your divorce decree and identify what changes, if any can be made to your divorce decree as a result of the changes in the tax laws in 2018. It may be advisable to agree to share the additional tax savings for 2017 between the two parties for the 2018 alimony payments made in December, 2017.

In addition, if alimony payments are no longer deductible and alimony received is no longer includible in income, the change in the tax law will penalize the person making the alimony payments in future years and benefit the person receiving the alimony payments. Due to the change in the tax laws, the party paying the alimony may want to consult with their divorce attorney to see if the divorce decree could be amended for the change in the tax consequences to both parties.

#3 – Failure to prepay your 2017 tax return preparation fees by December 31, 2017. Under the new Trump tax law proposals, tax return preparation fees will no longer be tax deductible in 2018. It may also be advisable to pay not only your 2017 tax return preparation fees but also 2018 estimated tax return preparation fees too.

#2 – Failure to maximize your charitable donations in 2017! The new tax laws are expected to lower personal tax rates in 2018. Therefore by paying Charities your expected donations for 2018 through 2020, in 2017, you will save more taxes. However if you do not want to make a large donation to your charities covering future years, it may be advisable to make a significant charitable donation to a Greater Cincinnati Foundation Donor Advised Fund. In doing so, you or your designated family member will be able to direct what payments will be made to what charities in future years out of your Donor advised fund.

Due to the increase in the standard deduction for single persons to $12,000 and married couples to $24,000, individuals may not get a tax benefit from charitable donations in future years. Beginning in 2018, with the changes in itemized deductions, most taxpayers will only get deductions for real estate taxes, mortgage interest and charitable donations.

Mortgage interest on home equity loans will not be tax deductible beginning in 2018.  Taxpayers should pay all interest owed on their home equity loan by 12/31/2017.  Also, they should consider restructuring that debt into a loan that is tax deductible beginning in 2018.

The higher standard deduction may result in many taxpayers not getting a tax benefit from their donations beginning in 2018. Therefore it may be advisable to make a significant donation to your Greater Cincinnati Foundation Donor Advised Fund by the end of December, 2017, to make the donations that you would be making over the next three to five or more years.

#1 – Failure of cash basis taxpayers to prepay 2018 operating expenses in December, 2017 and defer income from 2017 to 2018. The proposed tax law changes will typically result in business owners having lower tax rates in 2018. Therefore by taking deductions in 2017 or deferring income to 2018, business owners will pay less taxes in 2017 when the tax rates are higher. It is advisable to meet with your CPA to review the tax rules for accelerating deductions and deferring income so that your tax savings are protected from IRS challenge.

Inherited IRA Options for the Non-Spouse Beneficiary

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Did you know that when you inherit an IRA you can limit your income tax liability by deciding how distributions are made to you?  Unfortunately, many IRA beneficiaries don’t know they have options and so they cash in their inherited IRA and expose themselves to significant income tax liabilities.  The options available to IRA beneficiaries vary depending on if the beneficiary is a spouse or non-spouse, so this article will focus on the three distribution options non-spouse IRA beneficiaries typically have to limit their tax liabilities. Not all distribution options work best for every situation, so IRA beneficiaries are encouraged to consult with their CPA and attorney to find out which option works best for them.

Option 1: Rollover IRA with Five Year Distribution

If an IRA owner dies and designates a non-spouse beneficiary, such as a child, parent, sibling, or friend, the beneficiary can choose to rollover the IRA into their name, but the entire IRA must be distributed to the beneficiary within five years of December 31 of the year following the IRA owner’s date of death.  This option gives the non-spouse beneficiary access to money relatively soon and spreads out the tax liability over a five year period, rather than in one year if a lump sum distribution is taken.

Option 2: Stretch IRA

The second option for a non-spouse beneficiary is a stretch IRA.  With a stretch IRA, the non-spouse beneficiary receives the IRA’s annual required minimum distributions (RMD) over the beneficiary’s remaining life expectancy. The beneficiary’s remaining life expectancy is determined by the beneficiary’s age in the calendar year following the year of death and reevaluated each year.  For example, if the IRA owner dies and his 50-year-old daughter is the sole beneficiary, the daughter may choose to stretch out the IRA over her remaining life expectancy and will only receive the RMD each year.  Beneficiaries who elect this option are only responsible for paying income taxes on the RMD they receive each year.  This option has more favorable tax rules but limits the amount of money available to the beneficiary on an annual basis.

Beneficiaries who choose a stretch IRA need to be aware that ownership of the IRA must stay in the decedent-owner’s name, for the benefit of the beneficiary.  If the beneficiary has already transferred the IRA ownership into their name, the IRA will be subject to the IRA Rollover rules over a 5 year period.

Option 3: Lump Sum Distribution

A non-spouse beneficiary also has the option to completely cash in the IRA and take a lump sum distribution. The beneficiary will be responsible for paying income taxes on the distribution in the year the distribution is made.  This option gives the beneficiary immediate access to money but can potentially subject the IRA income to higher tax rates.

The IRA distribution rules and options for a non-spouse beneficiary are complicated. If you are the beneficiary of an inherited IRA, meet with your CPA or tax attorney to decide what option will work the best minimize your taxes.

 

Bill Hesch is a CPA, PFS (Personal Financial Specialist), and attorney licensed in Ohio and Kentucky who helps clients with their financial and estate planning.  He also practices elder law, corporate law, Medicaid planning, tax law, and probate in the Greater Cincinnati and Northern Kentucky areas.  His practice area includes Hamilton County, Butler County, Warren County, and Clermont County in Ohio, and Campbell County, Kenton County, and Boone County in Kentucky.

(Legal Disclaimer:  Bill Hesch submits this blog to provide general information about the firm and its services.  Information in this blog is not intended as legal advice, and any person receiving information on this page should not act on it without consulting professional legal counsel.  While at times Bill Hesch may render an opinion, Bill Hesch does not offer legal advice through this blog.  Bill Hesch does not enter into an attorney-client relationship with any online reader via online contact.)

The Top 3 New Year’s Resolutions for the Long-Term Success of your Small Business

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As a small business owner, how many times have you set lofty New Year’s resolutions for your business that never amounted to anything? This year, you can set three achievable resolutions that are simple to accomplish yet stay focused on the long-term success of your business. These resolutions will finally address those lingering tax savings, succession planning, and estate planning issues that you have put off for too long.  Accomplishing these resolutions will affect your bottom line and give you peace of mind for years to come.

Resolution #1: Implement Simple Choice of Entity Strategies for Tax Savings in 2017

Do you know if your business is taxed as a sole proprietorship, partnership, C-Corp, or S-Corp?  Do you know what tax bracket you are in? Did you know that if you are single, your business is a sole proprietorship, and you make between $37,650-$91,150, or if married, and you make between $75,300-$151,900, that your taxable rate on your business profits is 46%?  A business’ choice of tax entity can have major tax implications, but many small business owners are unaware that such issues exist. As a result, many small businesses are often taxed as the wrong type of entity and they end up paying too much in taxes.  This year, meet with your attorney and CPA to review your choice of entity options and see if you can save taxes by being an S-Corp.

Resolution #2: Establish a Succession Plan for Your Business that gives you Peace of Mind

A recent study found that only 30% of family-owned businesses survive the 2nd generation.  Many advisers believe this statistic is due to the fact that business owners have not established a plan for succession.  Have you ever thought about what will happen to your business if you get sick, become disabled, or pass away?  If you have a business partner and they get sick, become disabled, or pass away, do you really want to run the business with your partner’s spouse or children?  Do your key employees know your daily, weekly, and monthly responsibilities to keep the business afloat if tragedy strikes?  Most small business owners often fail to discuss these business succession issues with their partners and key employees.  They also fail to implement an Operating Agreement or Buy/Sell Agreement that identifies what happens to the business in the event of disability or death.  That is why 70% of businesses don’t make it past the 2nd generation. This year, schedule a time with your partners, key employees, CPA, and attorney to discuss and implement a successful succession plan.

Resolution #3: Avoid the Top Mistakes in Estate Planning and Plan for Potential Nursing Home Care for Your Aging Parents

There are many mistakes you want to avoid when considering your estate plan.  For example, statistics show that half of Americans die without a Will – creating headaches and uncertainty for their loved ones.  Many more Americans become sick or disabled and don’t have Powers of Attorney in place, forcing their families to go through the grueling guardianship process to pay bills and make medical decisions.  Not utilizing a trust in your estate plan can also create problems, especially in blended family situations.  Without a trust in place, the surviving spouse in a blended family could potentially disinherit the deceased spouse’s children and leave them nothing.

Additionally, don’t ignore the fact that your aging parents might need nursing home care in the future.  If you delay your parents’ long-term care and elder law financial planning for too long, your parents will be required to spend all of their hard-earned assets on their nursing home care before they qualify for government assistance.  However, if you and your parents timely set up the right kind of financial plan, your parents can successfully protect their assets from the nursing home, and still qualify for government assistance.  This year, meet with your estate planning attorney and CPA to review your estate plan and to discuss potential Medicaid planning options for your aging parents that will give you peace of mind.

These three simple resolutions for your small business will be discussed in further detail at the 2017 Ultimate Workshop – Tax, Succession, and Estate Planning for Business Owners on February 2, 2017 at the Northern Kentucky Chamber of Commerce.  At this free interactive workshop, Bill Hesch and Amy Pennekamp will discuss relevant tax, succession, and estate planning issues that are often overlooked by small business owners and their attorney, CPA, and financial advisors. Those in attendance are eligible for a free one hour consultation from Bill. Ohio Attorneys and CPAs will receive 2.5 hours of continuing education credit.  For more information or to register for this year’s Ultimate Workshop, please click here or call Bill at (513) 509-7829.

Bill Hesch is a CPA, PFS (Personal Financial Specialist), and attorney licensed in Ohio and Kentucky who helps clients with their financial and estate planning.  He also practices elder law, corporate law, Medicaid planning, tax law, and probate in the Greater Cincinnati and Northern Kentucky areas.  His practice area includes Hamilton County, Butler County, Warren County, and Clermont County in Ohio, and Campbell County, Kenton County, and Boone County in Kentucky.

(Legal Disclaimer:  Bill Hesch submits this blog to provide general information about the firm and its services.  Information in this blog is not intended as legal advice, and any person receiving information on this page should not act on it without consulting professional legal counsel.  While at times Bill Hesch may render an opinion, Bill Hesch does not offer legal advice through this blog.  Bill Hesch does not enter into an attorney-client relationship with any online reader via online contact.)

Releasing Tax Liens on Business Assets-Case Study

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If your business has IRS and/or Ohio state tax liens, your tax problems will not just go away on their own.  The IRS and state of Ohio will eventually seize your assets or force you to declare bankruptcy – causing mayhem for you, your business, and your family.  However, if you find yourself deep in a hole with tax liens, there are different settlement strategies you might be able to implement to release these liens without completely paying them off.  These strategies may require you to sell most or all of your business assets, but you’ll ultimately save the time, money, hassle, and embarrassment of going through bankruptcy proceedings or having your assets seized.

Recently, my law firm helped a client sell his business assets which had almost $1 million of IRS and Ohio tax liens on his business’ assets.  Our client needed to get these liens released before he could close his business and sell all of its assets to a prospective buyer for under $100,000 which was the appraised valued of the assets.  However, the sale proceeds would not completely satisfy the liens and the buyer would not purchase the assets subject to the liens.  Using my 30 years of unique experience as an attorney and CPA, my law firm was able to negotiate with the various government agencies to release their liens in exchange for the share of the sales proceeds that they would each receive if the business were to go through bankruptcy.  The Ohio Department of Taxation was not willing to release its liens relating to Ohio sales tax and Ohio withholding tax liabilities, but it was willing to sign a forbearance agreement that protected the buyer from lien enforcement.  After we closed on the sale of the business assets, all the parties involved in the transaction were pleased with the outcome. The IRS and State of Ohio received what they would have taken in bankruptcy, my client avoided bankruptcy and asset seizure, and the buyer bought the assets clear of any lien issues.

If your business has serious tax lien problems, don’t bury your head in the sand.  Waiting to take care of your tax problems will only make matters worse.  There is no guarantee that the IRS or State of Ohio will release its liens, but your attorney and CPA can advise you on the best strategy to handle your unique tax lien problems.  Contact your attorney and CPA to find creative solutions to resolve your IRS and Ohio tax liens.

Bill Hesch is an attorney, CPA, and PFS (Personal Financial Specialist) who is licensed in Ohio and Kentucky and helps clients get peace of mind with their tax, financial, and estate planning.  He focuses his practice in the areas of elder law, corporate law, Medicaid planning, tax law, estate planning, and probate in the Greater Cincinnati and Northern Kentucky areas.  His practice area includes Hamilton County, Butler County, Warren County, and Clermont County in Ohio, and Campbell County, Kenton County, and Boone County in Kentucky.

 

(Legal Disclaimer:  Bill Hesch submits this blog to provide general information about the firm and its services.  Information in this blog is not intended as legal advice, and any person receiving information on this page should not act on it without consulting professional legal counsel.  While at times Bill Hesch may render an opinion, Bill Hesch does not offer legal advice through this blog.  Bill Hesch does not enter into an attorney-client relationship with any online reader via online contact.)

Amended Substitute House Bill 5 (HB 5)

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Dear Client and Friends:

This year Municipal tax reform will take effect under the Amended Substitute House Bill 5. The Amended Substitute House Bill 5(HB 5) was signed into law on December 19, 2015. The new provisions take effect beginning on or after January 1, 2016. HB 5 provides some relief to the overly burdensome process for businesses in determining what local tax to pay and withhold from their employees when they do business in multiple municipalities.

I have outlined just a few of the key provisions under the Municipal Tax Reform:
(1) Mandatory 5 year Net Operating Loss carry forward. Requires all municipal corporations to allow businesses to deduct new net operating losses(NOL) and to allow a five-year carry forward of such losses first incurred in taxable years beginning on and after January 1, 2017, and permits pre-existing losses to continue to be carried forward if current ordinances allow.
(2) Withholding provisions:
a. The “occasional entrant rule” will increase the number of days from 12 to 20 days whereby a traveling employee may enter a municipality before their employer is required to withhold on wages earned.
b. Employers will generally be required to begin withholding on the 21st day the employee conducts business within a municipality. There are limitations to the new law. If an employer expects the employee will work within a municipality more than 20 days, the employer will be required to begin withholding on day 1.
c. A “small employer” withholding exception will be available for businesses with gross receipts of less than $500,000. These businesses will not be subject to the 20 day rule and will only be required to withhold income tax for their principle work municipality (fixed location). Employee’s not subject to the local tax at the business’s fixed location can apply for a refund, but the employer still needs to withhold tax on their fixed location.

Listed above are just a few of the tax changes taking effect on January 1, 2016. If you would like a copy of the summary of the Amended Substitute House Bill 5, please give us call. The new law only gives taxpayers a short time to educate and prepare themselves for numerous changes in the municipal tax law. We will be working with our clients throughout the coming weeks to help them implement these changes. If you have any questions or have concerns about the effect of the changes on your business, please call us at (513) 731-6612.

Affordable Care Act Changes

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Under the Affordable Care Act, there are new reporting requirements for the employer to report the cost of coverage under an employer-sponsored group health plan. For years after 2011, employers generally are required to report the cost of health benefits provided on the Form W-2. All employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement.
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2015 Federal Gift & Estate Tax Rates | Estate Planning

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Each year, the IRS adjusts the limits for the amount of tax-free annual and lifetime gifts an individual can make. The Federal estate tax lifetime exemption is the amount an individual can leave to his or her heirs without having to pay Federal estate tax. The annual gift tax exclusion is the amount an individual can gift each year to another individual without using up their lifetime exemption. Beginning January 2015, the IRS has adjusted for inflation the federal estate tax lifetime exemption amount. The exemption amount has increased from $5.34 million to $5.43 million. The combined lifetime exemption amount has also increased for married couples, rising from $10.68 million to $10.86 million. With the Federal estate tax rate at 40%, it becomes critical to plan to avoid estate taxes if you are an individual with higher wealth exceeding the lifetime exemption.

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